Are you wondering what's in store for the 2016 housing market? Here's a look at current trends and some experts' predictions for the year ahead.

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What to Expect From the 2016 Housing Market

Most experts are calling for the U.S. housing market to maintain its momentum throughout the coming year. Here are some of the top predictions for 2016:

Home Sales and Prices Are Likely to Increase

Zillow expects home prices to rise by around 3.5 percent in 2016, while
CoreLogic, a data and analytics company, predicts a 4 to 5 percent increase. Either figure is likely to be somewhat lower than the final tally for home price appreciation in 2015, which CoreLogic measured at around 6 percent.

Mortgage loan originations for home purchases are expected to rise by around 10 percent, even though a larger drop in the number of refinances should result in an overall decrease in the number of housing-related loans.

Interest Rates Will Go Up Gradually

The average 30-year mortgage rate remains historically low at under 4 percent, even though the Federal Reserve raised the federal funds rate by .25 percent in December. Many experts expect the 30-year mortgage rate to reach 4.5 to 5 percent by the end of the year, assuming one or two more rate hikes occur in 2016.

An increase of 1 percent would mean paying approximately $60 more per month in principal and interest for every $100,000 borrowed.

Suburbs Will Become the New Boomtowns

Rising home prices in mid-city hotspots are driving both buyers and renters into outlying areas, leading to an increased demand for properties in walkable, amenity-rich suburbs,
according to Zillow. This nationwide trend is most pronounced near cities that have seen dramatic price increases over the past few years.

Boomerang Buyers Will Make a Comeback

Boomerang buyers who lost homes to foreclosure during the recession are now a significant home buying demographic.
According to the National Association of Realtors, nearly 1 million formerly distressed homeowners have already purchased another property, and 1.5 million more are expected to buy during the next 5 years.

Millennial Home Buyers Will Face Challenges

Eighty percent of millennials (people aged 18 to 35) place a high value on homeownership and one-third would like to buy within the next two years,
according to Trulia. While millennials are expected to be a strong home buying segment in coming years, many of them currently struggle with the ability to save up for a down payment, credit rating woes, and qualifying for the monthly payment.

While this doesn't prove a direct cause-effect relationship, it's worth noting that as the average student loan debt increased from just over $300 billion to over $1.1 trillion between 2004 to 2014, the
homeownership rate for those aged 35 and under dropped by more than 20 percent.

Rents Will Reach New Highs

Rental vacancy rates are at their lowest point in decades, and Zillow expects to see a new high for median rents in 2016. CoreLogic predicts that 1.25 million new households will be formed, with the majority looking for rental housing. This trend will be compounded by the significant number of millennials who would like to purchase a home but are not yet able to.

Buying Will Remain Cheaper than Renting

Buying a home will continue to be a better deal than renting in most markets,
according to Trulia, except for a few areas in California where renting may tip the scale in 2016. The report states that mortgage rates would have to increase to 6.5 percent before buying becomes more expensive than renting.

One notable fact about most of the housing predictions for 2016 is the fact that so many experts are calling for a year of continued strength. It's still always worth keeping in mind that while there are sound data supporting the predictions summarized here, experts can be wrong and no one knows for sure how factors that affect the global economy may play out in the U.S. housing market. It will be interesting to see how things look by the end of 2016.

Are you thinking of buying or selling a home in the next year, or could you use some remodeling advice? Even if you just need the name of a good service provider, please remember that I'm always here to help you. I welcome the opportunity to serve you, your friends and associates with my expertise and recommendations.

Please give me a call today at 206-778-4663 if I can be of assistance!